How we paid off $30,000 of debt

I had hoped for a magic solution, but when that didn’t happen, my husband and I tried more-ordinary — and more-difficult — means. This is how we did it.

One morning just before American Thanksgiving, with our two-year-old playing with trucks on the living room floor, my husband got out the laptop, put on a rockin’ Talking Heads song, and . . .

We logged on to our bank account and sent the final payment for our ????? credit card!

Then we gave each other a big high-five.

After five and a half years of marriage — plus a child, a relocation, the purchase of a new home and a career change — we finally had paid off nearly $30,000 worth of debt.

How’d we do it? I’d like to tell you there was one “holy cow” magic bullet that finally bailed us out.

You know, you become the Olympic budgeting champion overnight, or your husband sells that screenplay. Or the quilt from Aunt Ada turns out to be worth $100,000 because of its rare use of vintage materials from Kmart.

But none of that happened.

No fairy tales

If I had to pinpoint a key transition that paved the way to our debt freedom, it was when we both — silently — admitted there was no fairy tale ending to this stupid situation.

We would have to tighten our belts, gird our loins, roll up our sleeves — pick your metaphor — and do it all. And we:

-Cut expenses -Budgeted, budgeted and re-budgeted -Identified and changed bad habits -Adjusted expectations for our lifestyle -Took in a roommate -Moved -Tripled and quadrupled our minimum credit card payments -Quit using the cards -Saved a cushion for emergencies -Relied on automatic payments -Switched to a super low-interest card -Found ways to earn more money -Were honest with friends, family and ourselves about this priority

Fight the war on all fronts

The recipe for getting out of debt almost reads like a list of financial clichés to me now. (If you’re a faithful Women in Red reader, maybe it does to you, too.)

But as I look back on the past nearly six years, I can see that each step played a role. And the whole get-out-of-debt process requires fighting a war on many fronts.

When you win one battle, it leads to victory in another:

-If we hadn’t adjusted our lifestyle expectations, we would not have been able to cut expenses. -If we hadn’t cut expenses, we wouldn’t have been able to triple our payments. -If we hadn’t overcome bad habits, our budget would have failed more often than it did. -And if we hadn’t kept on top of our budget, we might not have conquered the bad habits.

It takes more than money

Spending money is what gets you into debt; saving money is what will get you out of it.

I agree with that. But based on all the research I’ve read about how and why people spend, it’s also essential to change your habits — how you think, how you live, how you spend and how you eat.

You have to begin to live the debt-free life long before you’re debt-free. That’s what we finally mastered.

I had to give up not just the habit of careless shopping but the habit of letting myself want things. We learned to live below our means.

3 steps back to the sanity of cash

We slowly developed the ability to discuss money with each other — and with other people. A big milestone for me was telling friends what I could or couldn’t afford. It’s painful to tell a friend you don’t have the money to attend her birthday weekend at a fancy resort, but I did it.

We monitored our spending and worked on our budget all the time, and we still do. We cut extraneous expenses: cable TV, the gym, eating out. Until our son was born, we made do with one cell phone.

Perhaps the most powerful antidote to debt that we embraced: saving.

When you begin to save whatever you can, $10 a week, and slowly increase that to $15 and then $25 — up to 10 or 20% of your income, ideally — it’s like creating a built-in support system.

Not only were we paying off our debts, we had money in the bank to cover those unexpected expenses that trip you up (or most of them).

Be extreme

But of course the thing that finally gets you out of debt is coming up with the extra cash.

The Women in Red message board is jam-packed with advice about how to squeeze more money out of your budget and drum up extra funds.

Some people sell stuff on eBay. Some people move to a smaller city or find ways to cut back (slashing cable and other utilities or trading in a car for a cheaper one are Women in Red favourites).

What I found was that small measures were good but that drastic moves were better. One year we took in a roommate. My husband constantly worked overtime; I signed up for extra freelance projects.

Extreme measures are necessary in part because it takes more time and money than you think to dig out of debt.

Earlier this year, I had a conversation with Jonathan Pond, a Boston financial adviser, author and contributor to a series about money on public TV.

Pond says many people have a misconception about how much money it takes to pay off debt: Because they’re making payments with after-tax dollars, they have to earn more than they realize.

Let’s say you have a $5,000 credit card balance with a 12% annual rate, setting you back $5,600 in a year. To pay it off, you would need to earn about 30% more cash than that. The amount of gross income you need to clear your card is closer to $8,000; after withholdings you end up with $5,600.

This doesn’t change the bottom line. You need $5,000 plus interest in cash to clear your card balance. But it helps to explain why it’s not so easy to come up with that money and why debt seems to stick around so long.

Tortoise or hare?

On the Women in Red Racers message board, which is devoted to helping readers pay off debt ($4 million and counting!), we talk about the two types of Racers: tortoises and hares.

I thought I was a hare, but as it turned out, I am a tortoise. And that’s OK. My husband and I still managed to get to the finish line.

I’d like to say I’m overjoyed, but I’m just relieved.

Now we have an additional $500 a month to put toward saving, especially our emergency fund. Once that’s funded (goal: $15,000; target date: fall 2009), we’ll be close to the sort of financial stability I think is ideal.